Health Cuts With Little Effect on Care

Wednesday

In Richmond, Va., where hospital beds are fewer, health care looks like the rest of the country’s, but cheaper.

RICHMOND, Va.

At the heart of the health care debate is the question of whether it’s possible to cut medical costs without harming patients. What has happened here in Richmond helps to answer that question.

Since 1996, the Richmond area has lost more than 600 of its hospital beds, mostly because of state regulations on capacity. Several hospitals have closed, and others have shrunk. In 1996, the region had 4.8 hospital beds for every 1,000 residents. Today, it has about three. Hospital care has been, in a word, rationed.

Neither the House health reform bill nor the Senate version would impose any such reductions on the nation’s hospitals. But the basic idea behind the bills’ cost-control measures is similar. They would try to slow the growth of medical treatments, be it through new rules for Medicare, a Cadillac tax on the costliest insurance plans or other measures.

So take a glimpse at what our future may look like:

The quality of care in Richmond is better than in most American metropolitan areas, according to various measures, and it continues to improve. Medicare data, for example, shows that Richmond hospitals do a better-than-average job of treating heart attacks, heart failure and pneumonia.

When I recently asked patients in Richmond whether they felt as if their care had been rationed, they found the question bizarre. “I feel like there’s nothing cheap about the care,” Janet Binns, a retired school district employee, said. After her elderly father fell down one morning, she e-mailed a doctor and was on the phone with him in minutes.

Yet when it comes to health care costs, Richmond’s rationing has made a clear difference. In 1992, it spent somewhat less than average, per capita, on Medicare — 126th lowest out of 305 metropolitan areas nationwide. Since then, though, costs have risen at a significantly slower pace than they have elsewhere. As a result, Richmond had the 39th lowest costs in 2006.

Of course, Richmond is no medical panacea. Some of its hospitals do poorly on Medicare’s metrics, and I’m sure some patients there feel that they are not getting care they need — just as is the case in every other part of the country. But that’s kind of the point, isn’t it?

Richmond has gotten rid of 15 percent of its hospital beds, and its health care still looks a lot like the rest of the country’s, only cheaper and a bit better.

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Peter Bernard — the chief executive of Bon Secours, the second-largest health care system in Richmond — has spent the last two decades running hospitals. In 1987, when he became the chief operating officer of a South Dakota hospital, the state had a law similar to Virginia’s current one on capacity. If a hospital wanted to build a new wing or buy a new machine, it had to apply for something called a certificate of need from the state and show that the community needed the new service.

But South Dakota scrapped that program in 1988, and Mr. Bernard quickly went on an expansion binge. “When it went away, I busted every franchise my competitor had,” he told me. He started an open-heart program. He started a neonatal intensive care unit. He built what he called a “big, huge” obstetrics practice.

Suddenly, southeastern South Dakota had vastly more medical capacity than just a few years earlier.

In other industries, all that new capacity might have led to a glut, in which workers and equipment sat idle. But health care is different. Doctors and patients tend to believe that more care is better, and patients often don’t pay much extra for any additional care. So new doctors, nurses and equipment generally stay busy.

Dr. John Wennberg of the Dartmouth Medical School refers to this phenomenon as supply-sensitive care. Dr. Marlon Priest, the chief medical officer of Bon Secours, puts it this way: “If you build 100 beds, they’ll get used.”

Mr. Bernard said he would be happy to do precisely that in Richmond — to expand, much as he did in South Dakota. His overriding goal is to make his hospitals as successful as possible, not to reform American medicine. Today, though, he can’t succeed simply by expanding.

Virginia requires him to get permission. It is one of 37 states with a certificate-of-need program, and unlike some, Virginia’s is more than a mere formality. If a hospital even wants to move, it needs permission to remain as big as it was (which is a big reason hospital capacity has shrunk in recent years). Major hospitals usually win approval for the certificates they request, but the process itself is often enough to discourage them from applying. It’s even more discouraging to individual doctors who are thinking of buying, say, their own M.R.I. machine.

That seems to be why Richmond is dominated by a small number of group practices. Three orthopedic groups provide essentially all the orthopedic care. One pulmonologist group provides much of the lung care. Richmond doesn’t seem to have many of the entrepreneurial doctors, common in some other places, who are extremely aggressive about doing procedures or tests. “There aren’t a lot of people who are on the fringe doing things that are not medically acceptable,” Dr. Marc Katz, a cardiac surgeon, says.

Nobody in Richmond thinks that the certificate of need is a silver bullet. Some say the area emphasizes primary care, which holds down costs. Others named Virginia’s $2 million cap on malpractice awards. Dr. Sheldon Retchin, head of the Virginia Commonwealth University Health System, pointed out that his hospitals self-insure for malpractice — which gives them more incentive to reduce the costly medical errors that lead to lawsuits.

But there is little question that constraints on supply matter. Intriguingly, doctors and hospital executives told me that they thought Virginia regulators had become more lax about handing out certificates in recent years. One executive speculated that cost growth had probably picked up in recent years as a result.

So after my visit, I asked the Dartmouth researchers who analyze Medicare spending if they had any data more recent than the 2006 numbers I already had. They did. And the latest numbers showed that spending growth had indeed accelerated. In 2007, Richmond had the 69th lowest Medicare spending, compared with 39th the previous year. Build the capacity, and it will get used.

During the long fight over health reform, skeptics have often suggested that there really is no way to cut spending without hurting people. Insurance companies and labor unions say a Cadillac tax will discourage necessary care. Congressional Republicans have criticized the proposed Medicare oversight commission as an agent of rationing.

These concerns are understandable, too. Intuitively, cutting health spending seems as if it should damage health.

Yet we now have abundant evidence that it does not have to. That’s the lesson of Richmond. It’s also the lesson of those model hospital systems, like the Cleveland Clinic, that get excellent results with relatively low costs. More care is not always better care. Sometimes, in fact, it’s worse. Just consider the recent research showing that radiation from CT scans will eventually kill thousands of patients a year.

Changing our more-is-always-better health system will not be easy. It will require difficult, uncertain decisions. But the alternative to those decisions is the system we have now — one that features unacceptably spotty care, a Medicare program on the path to insolvency and insurance premiums high enough to eat up workers’ pay increases.

We can do better than that. It looks as if we are about to try.

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